COMMISSION OF THE EUROPEAN COMMUNITIES

Transcription

1 COMMISSION OF THE EUROPEAN COMMUNITIES REVISED VERSION COMC87) 328 final/2 Brussels, 21 August 1987 PROPOSAL FOR A COUNCIL DIRECTIVE ON APPROXIMATION OF THE RATES OF EXCISE DUTY ON ALCOHOLIC BEVERAGES AND ON THE ALCOHOL CONTAINED IN PRODUCTS OTHER (presented by the Commission) COMC87) 328 final/2

2 COMMISSION OF THE EUROPEAN COMMUNITIES AMENDMENT CONCERNS ALL THE LANGUAGE VERSIONS COM(87) 328 final/3 Brussels, 10 November 1987 I,. Proposal for a COUNCIL DIRECTIVE on approximation of the rates of excise duty on alcoholic beverages and on the alcohol contained in other products,. (presented by the Commission> COM(87)328 final/2, Proposal for a Cound l Directive, Article 7. Delete ''1.32" ECU and "., substitute : 1.36 ECU '4. COM<87) 328 final/3

3 EXPLANATORY MEMORANDUM I. INTRODUCTION The overall approach towards completing the internal. market as far as indirect taxation is concerned is described in the Global.communication td the Council (1). That co~munication sets out the reasons underlying the proposals which the Commission is making and deploys the arguments in their support. It is particularly important therefore that the present document should b e read in conjunct ion with the Global Communication. This proposal is for duties on alcoholic containing alcohol. a.directive concerning excise bev~rages and other products II. GENERAL CONSIDERATIONS 1. The Commission's proposals to harmonize the structure of excise duties on alcoholic beverages and other products containing alcohol <2> are already before the Counc i 1. These provide that the tax on wine is to be determined by its volume alone. spirits are to be taxed according to their alcohol content and beers according to their original gravity. 2. Turning to the rates of. duties, there is at present within the Community a great diversity in the levels of taxation reflecting various fiscal and social considerations and no valid pattern for the Community as a whole is discernible. 3. The jurisprudence. of the Court in this field under Article 95 of the EEC Treaty is helpful and can be :broadly- paraphrased as laying down that where a Member State cannot be regarded as a producer of a given drink it may not tax that drink in such a way as to protect its closest domestic competitors. (1) COMC87l320 <2> o.j. N c 43 of

4 3 On that basis, the Cout't has ruled, intet' alia, that Member States which do not produce particular types of spirits may not tax such goods more highly than spirits which they do produce, and that Member States which do not produce wine may not tax it more highly than beer, or more highly than fruit wine. At the same time, however, the numerous cases under Article 95 of the Treaty demonstrate that there is no abstract requirement to tax similar or competing products equally = provided that Member States do not so arrange their tax systems as to protect national products against imports, they may tax products at such rates as they think fit. III. TAX APPROXIMATION OF SPIRITS. WINE AND BEER 1. Recognizing that the taxation of the different families of alcoholic drinks could not be examined in isolation, the Commission has examined the feasibility of fixing the rates of taxation for all alcoholic drinks by reference to a single criterion, for example, alcoholic strength, volume or value. It found that while the simple logic of a consistent system is attractive, the rates which result are invariably extremely disruptive both as regards the revenue of individual Member Stat~s and the distribution of the Community-wide tax burden on the categories of drinks concerned. As a result the Commission discarded this approach and turned next to the general approach in other excise fields, namely that of applying the arithmetic average of existing rates. As indicated in the Global Communication < 1), that approach is the most equitable since it gives equal weight to each Member State ~egardless of its size. For the maj6r. categories of alcoholic drinks the arithmetic averages of the rates applicable ~t April 1987 are: for spirits, ECU per hl of pure alcohol ; for wine, ECU per hl ; - for average.beer 22.5 ECU per hl. C1 > COMC87>320

5 4 2. As applied to spirits, the arithmetic average gives a rate which would produce a modest increa~e in Community revenue ~ not taking into account elasticities of demand. It has the advantage of minimising revenue d i erupt ion for the three Member States which would be obliged to reduce significantly their current levels of taxation. Four Member states will be virtually unaffected by these proposals. Th.ose Member States which currently apply very 1 ow rates of tax on spirits will of course be required to raise. their rates considerably. However, the Commission considers that this result is consistent with the general practice of the majority of Member States in taxing spirits highly. The Commission accordingly proposes a rqte of 1271 ECU per hl of pure alcohol for spirits. 3. However, for wine, because the arithmetic average gives equal significance to the rates of all Member States, the very high rates applied in three Member States Cwhere consumption is low and where there is little or no domestic production>, dramatically inflate the Community arithmetic average rate. The effect, assuming unchanged consumption, would be to produce an increase of over 450%, or 7 b i 11 ion ECU, in revenue from wine within the Community as a whole. At the same time, the rate which emerges for beer - taken here as containing 5'Y. alcohol would. if applied together with the wine rate, be in conflict with the principles set out at point I!C3) above: The arithmetic average.is thus clearly an unacceptable basis for the approximation of excise duty ~n wine and beer. 4. The Commission also considered applying the average of existing rates for wine and beer weighted according to consumption' in the Member States. However. because this ' approach magnifies the significance of the rates in Member States where consumption is high and where wine is subject to little or_ no taxation, the results move to the opposite extreme. The rates which emerge are : - for wine ECU per hl : - for average beer ECU per hl. tjhile these rates, by definition, produce no change in overa 11 revenue within the Community from either of the two drinks. they would require Member States which for climatic reasons cannot produce wine in commercial quantities to tax it at rough 1 y half the rate per 1 i tre which they apply to domestic beer. Such a proposal would not be realistic.. - l ~.-

6 5 5. In view of the failure of either system of averaging to produce acceptable results for beer and wine, the Commission has sought a solution which would minimise the disruptive effects outlined above. It finds that this requirement can be met by equal taxation of liquid quantities a solution which recognizes the competition between the two drinks at rates which would produce the current revenue within the Community from the two drinks taken together. The effect on the individual drinks, assuming unchanged consumption, would be to decrease beer revenue within the Community as a whole by some 0. 9 bill ion ECU and to increase by a corre spending amount the revenue from wine. The rate which achieves these results and forms the basis of the Commission's proposal is 17 ECU per hec tol i tre of wine and average beer, which converts to a charge for beer expressed per hectolitre/degree Plato of 1.32 ECU. IV. TAX APPROXIMATION OF SPARKLING WINES AND e.boducts INTERMEDIATE 1. Throughout the Community, sparkling wine is generally subject to higher taxation than still wine. There is great diversity in the leve 1 s of tax at ion, which follow no particular pattern. The application of the straightforward arithmetic or weighted averages for these products again produces unrealistic results and the Commission therefore proposes for these products the rate for still wines increased by the average of the current differentials C cal cui a ted in terms of pro port ion) in Member States which tax both drinks. The rate which results is 30 ECU per hl. 2. For intermediate products, the proposal for a directive on the harmonization of tax structures < 1) currently before the Council allows Member States an unmanagea.bly w.ide measure of discretion in choosing their method of taxation. Clearly, a tax structure which permits a Member State to base its taxation on the volume of the product alone or on both the volume of the product and its alcohol content is not a suitable basis on which to attempt to approximate rates of taxation. A common tax structure for intermediate products needs to be established. <1J O.J. N C 114 of

7 6 The Commission considers on balance that for this relatively narrow band of medium strength products, it is not essential to take alcoholic strength into account in determining the tax burden, and that intermediate products should be taxed by reference to their volume alone. The Commission intends to submit a suitable amendment to the proposal on the harmonization of the tax structure of intermediate products. The current structures and levels of Member States 1 taxes on intermediate products differ widely. The arithmetic average of the existing rates again produces unrealistic results. However, the weighted average, the calculation which has a neutral effect on total revenue with in the Community, produces a rea 1 i st ic rate which - assuming an average strength for these products of 18~ - is equivalent to some 37~ of the proposed Community rate on spirits. That rate - rounded to 85 ECU per hectolitre - also represents the rough equivalent of the rate which would result if typical intermediate products were taxed according to their constituent fermented and distilled alcohols..-.~. V~ TAX APPROXIMATION OF PERFUMES TOILETRIES AND COSMETICS 1 There are at present within the Community no common conditions governing the denaturing of alcohol for use in perfumes, toiletries and cosmetics. There is considerable diversity in the systems of taxation applied to such products in the Member States. The Commission 1 s proposal for the harmonization of the structures of excise duty on alcohol will be amended as soon as possible to provide common conditions for denaturing and to exempt denatured alcohol from excise d-uty. In certain Member States undenatured alcohol is currently used to produce perfumes, toiletries and cosmetics, and the structure proposal does not seek to prohibit such use. For reasons of revenue protect ion, however, it is necessary to apply a duty to such un~enatured alcohol. ~ ~ l.... ~;

8 7 The Commission considers that the appl!cation of a reduced rate equal to one-third of the rate for potable alcohol will meet that requirement. The rate proposed for the alcohol contained in perfume, toiletries and cosmetics is therefore 424 ECU per hectol i tre of pure a 1 coho!. Perfumes, cosmetics and the like are of course very "high value added" products in that they are very expensive in relation to the value of their ingredients. The proposed duty on these products would represent a very small proportion of the retail selling price. 2. For the reasons given in the Global Communication, the Commission proposes that there should be no flexibility in the level of common excise duty rates to be applied to a 1 coho! i c beverages and to the alcohol contained in other products. VI. 1. Content PROPOSAL FOR A DIRECTIVE For the reasons set out above the Commission proposes the following rates of duty 1 ) Potable alcohol ECU per hl of pure alcohol 2) Alcohol in perfume, etc. 424 ECU per hl of pure alcohol 3) Intermediate products 85 ECU per hl 4) Still wine 1 7 ECU per hl 5) Sparkling: wine 30 ECU per hl 6) Beer 1 ;3Z ECU per hi/degree Plato

9 8,. ' ; 2. Effect In the Commission's view, when ~et against the complexity and diversity of Member States current treatment of alcohol products, the rates which it proposes represent a reasonable and even-handed solution. It is to be expected that~ assuming unchanged consumption, the rates proposed by the Commission wi i 1 produce significant increases in revenue in four Member States CGR, I, SP, P> partly because they do not at present tax wine and partly because their current systems of sprits taxation apply very low rates to certain popular products. More moderate increases in revenue are to be expected in four Member States c B, D, F, L > In three Member States ( DK, IRL, U.K.), where current rates of tax on all alcoholic beverages are very high,. significant reductions in revenue are to be expected and :a moderate reduct ion is to be expected in one Member.,''State CNL>.

10 9 3> Detailed commentary The following comments are called for on the individual articles of the proposal for a directive. Article 1 This Article lays down the principle that common rates of excise duty sha 11 apply to alcoholic beverages and the alcohol contained in other products by 31 December Article 2 This Article lays down the scope of the Directive and defines its terms. The common rates shall apply to all a 1 coho 1 products other than those specifically exempted from excise duties under the directives cited in this Article. Article 3 This Article provides for the periodic adjustment of the common rates. Such a provision is considered a necessity for duties expressed in specific terms. The Article simply lays down that the system of adjustm8t shall be established by a subsequent directive. Article 4 This Article lays down the common rate of excise duty for alcohol contained in alcoholic beverages other than beer, wine and intermediate products and the common rate for undenatured alcohol contained in perfumes, toiletries and cosmetics. The rates are expressed per hectolitre of pure alcohol. Article 5 This Article lays down the common rate of expressed per hectolitre of product, for products. ex c i s e duty, i n t e r m e'd i at e Article 6 This Article lays down the expressed per hectolitre sparkling. wine. common rates of excise duty, of product, for wine and

11 10 Article 7 This Article lays down the common rate of excise dtity for beer expressed per hectolitre and degree Plato~ Article...Jt.This Article lays down the deadline for compliance with.the Directive and requires Kember States to inform the commission immediately of any changes made in national law in th~ field covered by the Directive. ~ t, I,..

12 14 Proposal for a Council Directive on approximation of the rates of excise duty on alcoholic beverages and on the alcohol contained in other products THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to- the Treaty establishing the European Economic Community, and in particular Article 99 thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Parliament ( 1 ) Having regard to the opinion of the Economic and Social Committee (2) Whereas Council Directives... (3) lay down provisions relating to the structures of excise duties applicable respectively to alcohol, wine, beer and intermediate products, Whereas for the purpose of establishing an internal market without frontiers it is necessary to apply common rates of excise duty to each of these products, Whereas it is necessary to provide for the periodic adjustment of those common rates~ Whereas a reduced rate should be applied to alcohol used in the preparation of perfumes, and cosmetics~ undenatured toiletries Whereas the excise duty on intermediate products should be charged by reference to their volume~ Whereas different rates of excise duty should be applied to still wine and sparkling wine~ Whereas the excise duty on beer should be charged by reference to the original gravity of the product, HAS ADOPTED THIS DIRECTIVE: (1) (2) (3)

13 1\ 2 j ' Article 1 Not later than 31 December 1992 Member States shall apply common rates of excise duty on alcoholic beverages and on the alcohol contained in other products in accordance with this Directive. Article 2 The products cove~ed by this Di~ective ere alcohol and alcoholic beverages as defined in Directive... intermediate products as defined in Directive... '.wine as defined in Directive..., I,. \ ~beer as defined in Directive Article 3 ihe common rate$ of exci~e duty laid down in this Directive shall be adjusted pe~iodically in accn~dance with provisions to be established before 1 january 1989 in a Directive adopted by the Council acting on a proposal from the Commission. Ar.t ic 1 e 4. '.. f 1. The common ~ate of excise duty on alcohol contained in alcoholic beve~ages other than those.referred to in Articles 5 to 7 below. and on the alcohol contained in f6odstuffs shall be 1271 ECU per hectolitre of pure alcohol. 2. A reduced rate of 42'4. ECU per hectol i tre alcohol shall be applied to undenatured ethyl contained in perfumes, toiletries ~nd cosmetics. of pure alcohol :.. ':. '... i.:

14 1 3 Article 5 r The common rate of excise duty on intermediate products shall be 85 ECU per hectolitre of product. -~~ Article 6 The common rate of excise duty on wine shall be - as regards still wine, 17 ECU per hectolitre of product; - as regards sparkling wine, 30 ECU per hectolitre of product. Article 7 The common rate of excise duty on beer shall be 1.32 ECU per hectolitre/degree Plato of finished product at a temperature of 15 C. Article 8 Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive not later than 31 December They shall forthwith inform the Commission of any provisions of national law which they adopt in the field governed by this Directive. Article 9 This Directive is addressed to the Member States. Done at Brussels, For the Council The President

15 Statement of impact on SME. I i,., L Proposal for a Council Directive approximating the rates of excise duty on alcoholic beverages and on the alcohol contained in other products. The approximation of indirect taxes <excises and VAT) is necessary if fiscal frontiers are to be abolished. The proposal for a directive on rates of alcohol duty is an integral part of the Commission's programme for completion of the internal market. 1> Contraintes administratives None 2) Allegements pour les entreprises The White Paper on completing the internal market explains that the approximation of excise rates is a necessary pre-condition for the elimination of fiscal frontiers; the aim of the programne is to enable businesses to dispense with frontier formalities. 3) Inconveni ents pour les entrepri ses '.. "! r. l. The Commission proposes Community rates for the various groups of alcoholic drinks. The adoption of these rates will mean for each group. a fall in taxation in currently high taxing countries and an increase in low taxing countries, with consequent results for the sectors and countrie~ concerned. 4> Effets sur l'emploi ~irect effects o~ emplriymeni should-~~ negligihle. S> Y-a-t-il eu concertation avec_les partenaires sociaux? ~ No, they have not been consulted. 6) No easier alternative exists. ::... :-.. ':,,. :.. - t : :~<--~-- :. -.. )J. :. ' -..